Executive Briefings

Working Without a Net: Emerging Market Compliance

Surging growth in emerging markets and constantly changing international trade regulations are testing the ability of aviation and defense companies to manage compliance on a global scale.

Working Without a Net: Emerging Market Compliance

Globalization, of course, fuels the current stunning demand for new airplanes. But it requires mastery of detailed, country-specific supply chain rules to ensure competitiveness. Those who fall short risk losing business, and they could face penalties for non-compliance.

In a lot of ways, it’s a high-wire act, and companies need the right logistics partner to keep their balance so they can focus on core strengths.

Aircraft demand continues to fuel expansion throughout the aerospace value chain, and companies are capitalizing on the opportunities this growth creates.

For instance, Boeing and Airbus expect to ramp up production by 500 aircraft over the next three years, more than doubling production from 2008 and placing significant strain on the global supply base.

It’s busy on the military side, too, with international orders increasing backlogs for defense manufacturers in the United States. Exports were up more than 9 percent year over year in 2014 to $14.7bn. Looking at a single weapons system, the Pentagon plans to triple production of the F-35 Joint Strike Fighter to 150 aircraft per year by 2020.

Growth throughout the aerospace industry is dynamic, but this business is tightly regulated. Companies must navigate stringent rules and multi-layered trade agreements as well as import-export compliance. Doing this successfully as they expand their business in emerging markets is a pressing concern for top aerospace firms surveyed by IDC Manufacturing Insights for UPS.

“As their customers originate from or expand into new geographies, [aerospace and defense] companies need to get up to speed quickly on country-specific requirements, find suppliers, locate or build facilities and manage logistics,” according to the UPS white paper Aerogistics: Insight on Meeting Global Trade Compliance Requirements. “Clearly, A&D companies have significant concerns around their ability to effectively manage the moving target of changing compliance mandates.”

Some, in fact, turn down business because of the overwhelming complexity.

Product certification was a key requirement to satisfy as were developing product sourcing strategies and selecting and managing suppliers.

But country-specific compliance and document management related to global trade were noted pain points. Specifically, companies said detailed government requirements around importing and exporting posed unique challenges.

“The consequences of missing a form or failing to record accurate classification based on local customs requirements can range from a critical shipment languishing in customs to penalties and fees,” according to the aerogistics report, which also notes that aerospace companies “can  face serious business disruption or damage to their reputation, including loss of contracts.”

Companies, however, are plugging gaps and finding success through technology and partnering with logistics providers with a broad range of capabilities, and critical visibility as business shifts throughout the world.

Aerospace companies value experienced logistics partners who can manage and expedite customs clearance. Manufacturers also want providers who can handle parts warehousing and kitting and who offer flexibility for moving materials and goods across multiple transportation modes.

These companies also expect logistics partners to provide full visibility into the movement of products through the transportation process.

Finally, relationship management is crucial, especially when there are disruptions. If a production line is held up by a missing part, it’s important to be able to identify the cause of the delay and correct the problem quickly and efficiently. This can minimize troubles downstream. In many cases, working with an effective customer representative can smooth out the kinks in the process.

Growth in the aerospace business is picking up steam around the world and especially in emerging markets. Supply chains in this industry often sprawl into uncharted territory, and the compliance requirements change every time you cross a new border.

That’s why it’s essential to select a logistics partner who knows the ropes.

Source: UPS

Globalization, of course, fuels the current stunning demand for new airplanes. But it requires mastery of detailed, country-specific supply chain rules to ensure competitiveness. Those who fall short risk losing business, and they could face penalties for non-compliance.

In a lot of ways, it’s a high-wire act, and companies need the right logistics partner to keep their balance so they can focus on core strengths.

Aircraft demand continues to fuel expansion throughout the aerospace value chain, and companies are capitalizing on the opportunities this growth creates.

For instance, Boeing and Airbus expect to ramp up production by 500 aircraft over the next three years, more than doubling production from 2008 and placing significant strain on the global supply base.

It’s busy on the military side, too, with international orders increasing backlogs for defense manufacturers in the United States. Exports were up more than 9 percent year over year in 2014 to $14.7bn. Looking at a single weapons system, the Pentagon plans to triple production of the F-35 Joint Strike Fighter to 150 aircraft per year by 2020.

Growth throughout the aerospace industry is dynamic, but this business is tightly regulated. Companies must navigate stringent rules and multi-layered trade agreements as well as import-export compliance. Doing this successfully as they expand their business in emerging markets is a pressing concern for top aerospace firms surveyed by IDC Manufacturing Insights for UPS.

“As their customers originate from or expand into new geographies, [aerospace and defense] companies need to get up to speed quickly on country-specific requirements, find suppliers, locate or build facilities and manage logistics,” according to the UPS white paper Aerogistics: Insight on Meeting Global Trade Compliance Requirements. “Clearly, A&D companies have significant concerns around their ability to effectively manage the moving target of changing compliance mandates.”

Some, in fact, turn down business because of the overwhelming complexity.

Product certification was a key requirement to satisfy as were developing product sourcing strategies and selecting and managing suppliers.

But country-specific compliance and document management related to global trade were noted pain points. Specifically, companies said detailed government requirements around importing and exporting posed unique challenges.

“The consequences of missing a form or failing to record accurate classification based on local customs requirements can range from a critical shipment languishing in customs to penalties and fees,” according to the aerogistics report, which also notes that aerospace companies “can  face serious business disruption or damage to their reputation, including loss of contracts.”

Companies, however, are plugging gaps and finding success through technology and partnering with logistics providers with a broad range of capabilities, and critical visibility as business shifts throughout the world.

Aerospace companies value experienced logistics partners who can manage and expedite customs clearance. Manufacturers also want providers who can handle parts warehousing and kitting and who offer flexibility for moving materials and goods across multiple transportation modes.

These companies also expect logistics partners to provide full visibility into the movement of products through the transportation process.

Finally, relationship management is crucial, especially when there are disruptions. If a production line is held up by a missing part, it’s important to be able to identify the cause of the delay and correct the problem quickly and efficiently. This can minimize troubles downstream. In many cases, working with an effective customer representative can smooth out the kinks in the process.

Growth in the aerospace business is picking up steam around the world and especially in emerging markets. Supply chains in this industry often sprawl into uncharted territory, and the compliance requirements change every time you cross a new border.

That’s why it’s essential to select a logistics partner who knows the ropes.

Source: UPS

Working Without a Net: Emerging Market Compliance